Connected and Autonomous Vehicle Landscape in 2040: Implications for Business Model Design

Technology changes all aspects of our life even if we do not recognize how far we have come. Numerous disruptive technologies have emerged in our lives and changed the way we do normal things such as communication, networking and socializing.

For example, Skype, which is the largest communication provider, owns no infrastructure. Similarly, UBER is the largest taxi service provider but owns no taxi vehicles; airbnb is the largest hospitality company but owns no real-estate and many more.

In the automobile industry, the autonomous and connected vehicle is a clear example of how such a disruptive technology may change the mobility service. Some advocates even believe that it will be the paradigm shift from ‘Best Driving Car’ into ‘Best Driven Car’ (Leveque 2016). The next generation might not have to drive around; they will not witness traffic congestion and accidents, they will not worry about finding parking spaces, stressing about speeding tickets or drunk driving.

This is not just a dream as some big steps were already being led by many giants such as Google, UBER, Tesla and Ford, in order to make this future a reality. We already witnessed some previous vehicle technologies which paved the road for the autonomous and connected vehicles such as automatic transmissions, airbags, hybrid vehicles and vehicle navigation systems.

This transformation is best understood by using the Six-Level Range of Automation that the Society of Automotive Engineers (SAE) has produced as shown below.

AutomatedDriving-table-large
Six-Level Range of Automation (Source: Smith 2016, p.15)

According to the above scale, a vehicle can be at level 0 which means the driver has the whole reasonability during the mobility action, up to Level 5 where the driver has no contribution during the journey. In that case, the vehicle will be equipped with a system that can cope with all situations automatically.

As any technology that requires decades of technical development and market growth to saturate their potential markets, automobile industry experts suggests that by the year 2040, the autonomous Vehicles will be the primary means of transport (Litman 2017, p.14; Smith 2016, p.15).

The purpose of this article is to shed some light on the implications of the connected and autonomous vehicle for the business model design. The rest of this article is outlined in the following:

  • Firstly, presenting the definition of the connected and autonomous vehicle;
  • Secondly, providing a brief about the benefits of this type of vehicles;
  • Thirdly, providing an illustration for the implications of the business model design for the different stakeholders that are engaged with the automobile industry; and
  • Finally, summarizing the future challenges that may be encountered during the development journey.

What does Connected and Autonomous Vehicle Mean?

Connected or Connected Vehicle refers to “the technologies that ensure communication between all contributing agents or stakeholders including pedestrians, authorities and vehicles, as well as infrastructure” (Bagloee et al. 2016) while Autonomous Vehicle is self-driving, driverless, or robotic vehicles (Litman 2017).

When we are talking about connected vehicles, then we may firstly refer to certain parts that will be added to the vehicle such as video camera, distance sensor and position sensor as shown in the below vehicle.

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Communication Technologies in Google Car (Source: Bagloee et al. 2016)

These parts are needed to allow the vehicle to obtain raw data and information from the surrounding environment, process them using certain software and finally, take the appropriate action. Within these vehicles communication systems, there are different types and purposes as shown below.

V2X-Copyrighted
Types and  Purposes of Connected Vehicle Communication Systems Source: What is Vehicle-to-Everything and How Will it Help?
 (Available on the WWW at: http: //mahbubulalam.com/vehicle-everything-will-help/
Last accessed Dec, 2017)

The Benefits

Autonomous and connected vehicles will help in solving many problems within the automotive ecosystem. Some of these benefits are:

  • Providing a safer transportation system: the vehicles will be fully controlled through programming systems, thus they will help in reducing the accidents that are related to human errors.
  • Reducing parking demand: the vehicles can park by themselves in compact spaces so there will be no need for huge parking slots like what we need for the normal cars.
  • Reducing congestion and traffic.
  • Lowering cost: the new vehicles will help in reducing the direct cost (such as fuel cost) and the indirect cost (such as the accidents costs and the traffic congestion cost).
  • Enabling mobility for non-drivers and people with disability
  • Improving land use due to decreasing the need for huge park spaces.
  • Generating positive impact on the environment due to reducing the fuel consumption and pollution emission.
  • Increasing road capacity where such cars may allow platooning (i.e. vehicle groups traveling close together).

The Implications for the Business Model Design

Before addressing the implications of the connected and autonomous vehicles on the business model design, it is worthy to summarize the main stakeholders that are involved in the automobile industry. The main stakeholders are:

  • Government, legislators and regulators;
  • Vehicle manufacturers;
  • Technology and telecom players;
  • People;
  • Dealer and retail network;
  • Academic institutions and researchers; and finally,
  • Other industries.

These stakeholders should recognize that having the autonomous and connected vehicles will allow MaaS “Mobility as a Service”. This is mainly related to the shift from privately-owned cars to other options such as car-sharing and car-riding.

The implications on five of these stakeholders are discussed below.

1. Government, legislators and regulators: this group of stakeholders might consider:

Evaluating the changes to government revenues that are currently derived from driving (e.g. parking revenues, penalties and fuel taxation) in order to find new streams.

  • Setting the right legislation to make driving such a vehicle a legal act.
  • Ensuring the availability of infrastructure and roadway design.
  • Working with other stakeholders in regards to driving certification, license requirements and training.
  • Planning for the employment changes that will result due to losing the normal transportation-related jobs.

2. Vehicle manufacturers: they may consider the following:

  • Creating new service opportunities such as autonomous car sharing.
  • Collaborating with universities, industry leaders and research institutes to enhance their R&D and advance their position in topics such as IoT and Big data.
  • Autonomous vehicles will increase the need for testing and manufacturing standards, especially for the critical components, as any failure might lead to fatalities.

3. Technology and telecom players: this group of stakeholders includes software developers, sensors manufacturers, power supplies..etc. This group might consider:

  • Finding new business opportunities that tackle all aspects of the autonomous vehicles (e.g. integrated solutions for connectivity, security and privacy, data processing, management and analytics).
  • Establishing partnerships with existing vehicle manufacturers.

4. Dealer and retail network: these parties might consider:

  • Finding new integrated service offerings (maintenance, software upgrades and customization, insurance, charging stations).
  • Developing new service opportunities such as autonomous vehicle driver training and certification.
  • Finding new opportunities in the aftermarket business.

5. Other industries: other industries might be affected by the connected and autonomous vehicle such as insurance companies, media and entertainment and finally hotel and real estate industry. In specific, and as a result of shifting the cars’ ownership from private-ownership into a fleet-based ownership and the reduction in cars’ accidents, insurance companies need to shift their core business model to focus more on insuring car manufacturers from liabilities due to technical failure of their systems, as opposed to protecting customers. In this case, insurance companies might find new money streams in the cybersecurity part, product liability and Infrastructure insurance. Similarly, autonomous cars will witness an increase in the media space as passengers can enjoy more free time during traveling. Finally, some optimistic believe that the new vehicles will allow passengers to take a good sleep and rest during traveling which might affect the hotels and real estate industry.

The Future Challenges

The future challenges that will encounter this shift might be summarized in the following:

  • Increasing the cost: while reducing the costs was one of the main benefits of having such a technology, there will be an increase in other cost streams such as maintenance, infrastructure and software upgrades.
  • Liability in case of accidents and whether we are going to blame the car manufacturer or the driver in case of an accident.
  • Cybersecurity and cyber terrorism
  • Security and privacy concern especially when increasing the dependability on car-sharing and car-riding.
  • Reliability of the vehicles in terms of having a consistent operation under heavy rain and snow.
  • Reduced employment.
  • Worsened health when more people are depending on cars rather than cycling and walking.

“Mind the Gap”

One day we will tell our children and grandchildren that we were instructed to ‘mind the gap’ before each train trip. Maybe this sentence will be just part of the history, but till then, we need to mind the gap between all the possibilities that come with the autonomous and connected vehicles and the ethical dilemma that carry with.

These kinds of vehicles may be required to take some ethical decisions. In the classical example which is known as ‘The Trolley Problem’, a car carries five passengers should decide whether to risk their lives or to hit a child that is running for his ball. In this case, the final decision is left to the vehicle and its programming; therefore, such moral and ethical decisions should be fully addressed before making these vehicles a reality.

References

Bagloee, S. et al., 2016. Autonomous vehicles : challenges, opportunities, and future implications for transportation policies. Journal of Modern Transportation, 24(4), pp.284–303.

Leveque, F., 2016. Autonomous business models: Paradigm shift from “Best Driving Car” to “Best Driven Car,” Germany.

Litman, T., 2017. Autonomous vehicle implementation predictions: implications for transport planning, Canada.

Smith, C., 2016. Turning Transportation: Challenges and Opportunities Presented to the City of Vancouver by Autonomous Vehicles, Canada.

 

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